HYDRO MED SCIENCES, INC. AMENDED AND RESTATED RIGHT OF FIRST REFUSAL AND CO-SALE AGREEMENT THIS AMENDED AND RESTATED RIGHT OF FIRST REFUSAL AND CO-SALE AGREEMENT

 

                                                        Exhibit 10.35

 

                            HYDRO MED SCIENCES, INC.

 

                   AMENDED AND RESTATED RIGHT OF FIRST REFUSAL

                              AND CO-SALE AGREEMENT

 

         THIS AMENDED AND RESTATED RIGHT OF FIRST REFUSAL AND CO-SALE AGREEMENT

(this "Agreement") is made and entered into as of May 30, 2003, by and among

Hydro Med Sciences, Inc., a Delaware corporation (the "Company"), each of the

persons and entities listed on Exhibit A hereto (the "Investors"), each of the

persons listed as "Common Stockholders" on Exhibit B hereto (the "Common

Stockholders"), and each of the persons listed as "Series A Stockholders" on

Exhibit C hereto (the "Series A Stockholders" and together with the Common

Stockholders, the "Current Stockholders").

 

                                    RECITALS

 

         The Common Stockholders are the beneficial owners of an aggregate

10,000,000 shares of Common Stock of the Company.

 

         The Series A Stockholders are the beneficial owners of an aggregate

7,000,000 shares of Series A Convertible Preferred Stock of the Company.

 

         The Investors are purchasing shares of the Company's Series B

Convertible Preferred Stock, pursuant to that certain Stock Purchase Agreement

(the "Purchase Agreement") of even date herewith (the "Financing").

 

         The obligations in the Purchase Agreement are conditioned upon the

execution and delivery of this Agreement.

 

         In connection with the consummation of the Financing, the Company, the

Common Stockholders, the Series A Stockholders, and the Investors have agreed to

the first refusal and co-sale rights as set forth below.

 

         In consideration of these premises and for other good and valuable

consideration, the receipt and sufficiency of which are hereby acknowledged,

intending to be legally bound hereby, the parties hereto agree as follows:

 

1. DEFINITIONS.

 

                    (a) "Common Stock" shall mean shares of the Company's common

stock, par value $.001 per share, and shares of Common Stock issued or issuable

upon conversion of the Company's outstanding Series A Convertible Preferred

Stock or Series B Convertible Preferred Stock or exercise of any option,

warrant, or other security or right of any kind convertible into or exchangeable

for Common Stock.

 

                    (b) "Preferred Stock" shall mean shares of Series A

Convertible Preferred Stock and Series B Convertible Preferred Stock.

 

 

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                    (c) "Preferred Stockholder" shall mean the Investors and the

Series A Stockholders.

 

                    (d) "Series A Convertible Preferred Stock" shall mean shares

of the Company's preferred stock, par value $.001 per share, designated as

"Series A Convertible Preferred Stock."

 

                     (e) "Series B Convertible Preferred Stock" shall mean shares

of the Company's preferred stock, par value $.001 per share, designated as

"Series B 10% Convertible Preferred Stock."

 

                    (f) "Stock" shall mean shares of Common Stock or Preferred

Stock now owned or subsequently acquired by the Current Stockholders or the

Investors by gift, purchase, dividend, option exercise or any other means

whether or not such securities are only registered in a Current Stockholder's or

Investor's name or beneficially or legally owned by such Current Stockholder or

Investor, including any interest of a spouse in any of the Stock, whether that

interest is asserted pursuant to marital property laws or otherwise. The number

of shares of Stock owned by each Current Stockholder as of the date hereof is

set forth on Exhibit B or Exhibit C, as applicable, which Exhibit may be amended

from time to time by the Company to reflect changes in the number of shares

owned by the Current Stockholders, but the failure to so amend shall have no

effect on such Stock being subject to this Agreement.

 

                    (g) "Stockholder" shall mean the holders of Stock, including

the Investors and the Current Stockholders.

 

                    (h) For the purpose of this Agreement, the term "Transfer"

shall include any sale, assignment, encumbrance, hypothecation, pledge,

conveyance in trust, gift, transfer by request, merger or consolidation, devise

or descent, or other transfer or disposition of any kind, including, but not

limited to, transfers to receivers, levying creditors, trustees or receivers in

bankruptcy proceedings or general assignees for the benefit of creditors,

whether voluntary or by operation of law, directly or indirectly, of any of the

Stock.

 

2. NOTICE OF TRANSFERS.

 

                    (a) Before any Common Stockholder, in the case of Section 3

or 5 of this Agreement, or any Investor or Series A Stockholder, in the case of

Section 4 of this Agreement, may effect any Transfer of Stock, such Common

Stockholder, Investor, or Series A Stockholder, as applicable (the "Selling

Stockholder"), must give at the same time to (i) the Company, (ii) if a Common

Stockholder, each other Common Stockholder (if any) and each Investor and Series

A Stockholder, (iii) if an Investor, each other Investor and each Common

Stockholder and Series A Stockholder, and (iv) if a Series A Stockholder, each

other Series A Stockholder and each Investor and Common Stockholder, a written

notice signed by the Selling Stockholder (the "Selling Stockholder's Notice")

stating: (a) the Selling Stockholder's bona fide intention to transfer such

Stock; (b) the number of shares of Stock proposed to be transferred to each

proposed purchaser or other transferee ("Proposed Transferee"); (c) the name,

address and relationship, if any, to the Selling Stockholder of each Proposed

Transferee; (d) the bona fide cash price or, in reasonable detail, other

 

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consideration, per share for which the Selling Stockholder proposes to transfer

such Stock to each Proposed Transferee (the "Offered Price"); (e) the proposed

time of payment; and (f) any other relevant terms of the proposed sale. Upon the

request of the Company, any Investor, any Series A Stockholder, or any Common

Stockholder, the Selling Stockholder will promptly furnish to the Company, all

other Investors, all other Series A Stockholders, and all other Common

Stockholders such other information as may be reasonably requested to establish

that the offer and Proposed Transferee(s) are bona fide.

 

3. RIGHT OF FIRST REFUSAL WITH RESPECT TO COMMON STOCKHOLDERS.

 

                    (a) The Company shall have a right of first refusal (the

"Company's Right of First Refusal") to purchase all or any part of the Stock of

any Common Stockholder proposed to be transferred by such Common Stockholder

("Offered Stock"), if the Company gives written notice of the exercise of such

right to the Selling Stockholder within 20 days (the "Company's Refusal Period")

after the date of the Selling Stockholder's Notice to the Company. Prior to the

expiration of the Company's Refusal Period, the Company shall send written

notice (the "Company's Notice") to the Selling Stockholder, each Investor, each

Series A Stockholder, and all Common Stockholders other than the Selling

Stockholder ("Other Common Stockholders") specifying (i) that the Company

intends to exercise the Company's Right of First Refusal in full or in part,

(ii) that the Company does not intend to exercise the Company's Right of First

Refusal in full, or (iii) that the Company is not lawfully able to repurchase

all or any portion of the Offered Stock.

 

                    (b) If the Company does not exercise its right of first

refusal in full, each Investor, Series A Stockholder, and Other Common

Stockholder will have a right of first refusal (the "Investors' Right of First

Refusal") to purchase some or all of the Offered Stock not purchased by the

Company. The Investors' Right of First Refusal may be exercised as follows:

 

                    (i) Each Investor, Series A Stockholder, and Other Common

Stockholder desiring to purchase some or all of the Offered Stock must, within

the 20-day period commencing on the date of the Company's Notice or expiration

of the period therefor (the "Investor Refusal Period"), give written notice to

the Selling Stockholder and to the Company of such Investor's, Series A

Stockholder's, or Other Common Stockholder's election to purchase the Offered

Stock, and the number of shares and type of the Offered Stock that such

Investor, Series A Stockholder or Other Common Stockholder desires to purchase.

If the total number of shares specified in the elections of the Investors,

Series A Stockholders, and Other Common Stockholders exceeds the number of

shares of Offered Stock available for purchase, then (unless the electing

Investors, Series A Stockholders, and Other Common Stockholders otherwise agree

in writing) each Investor, Series A Stockholder, and Other Common Stockholder

electing to purchase will have the right to purchase that number of shares of

Offered Stock that is obtained by multiplying the number of shares of Offered

Stock available for purchase by a fraction (A) the numerator of which will be

the number of shares of Common Stock then held by such Investor, Series A

Stockholder, or Other Common Stockholder, and (B) the denominator of which will

be the sum of the total number of shares of Common Stock then held by all

Investors, Series A Stockholders, and Other Common Stockholders electing to

purchase the Offered Stock.

 

                     (ii) Within five days after expiration of the Investor

Refusal Period, the Company will give written notice (the "Investors' Notice")

 

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to the Selling Stockholder, the Investors, the Series A Stockholders, and the

Other Common Stockholders specifying (A) that some or all of the Offered Stock

was subscribed by the Company, the Investors, the Series A Stockholders, and/or

the Other Common Stockholders exercising their respective Rights of First

Refusal and (B) that the Transfer proposed by the Selling Stockholder is subject

to the co-sale rights pursuant to Section 6 hereof with respect to the Offered

Stock.

 

                    (c) The purchase price for the Offered Stock to be purchased

by the Company, by an Investor, by a Series A Stockholder, or by an Other Common

Stockholder exercising its Right of First Refusal under this Agreement will be

the Offered Price (subject, in the case of the Company, to any rights the

Company may have under any other agreement to purchase all or some of such

Offered Stock at a lower price), and will be payable as set forth in Section

3(d) hereof. If the Offered Price includes consideration other than cash, the

cash equivalent value of the non-cash consideration will be determined by the

Board of Directors of the Company in good faith, which determination will be

binding upon the Company, the Investors, the Series A Stockholders, the Other

Common Stockholders, and the Selling Stockholder absent fraud or error.

 

                    (d) Payment of the purchase price for Offered Stock

purchased by the Company or by an Investor, Series A Stockholder, or Other

Common Stockholder exercising its respective Right of First Refusal shall be

made within 10 days after the date of the Investors' Notice; provided that, if

the Company elects to purchase all of the Offered Stock, payment of the purchase

price for such Offered Stock shall be made within 10 days after the earlier of

(i) the date of the Company's Notice or (ii) the expiration of the Company's

Refusal Period. Payment of the purchase price will be made, at the option of the

Company or, as the case may be, by an Investor, Series A Stockholder, or Other

Common Stockholder to the Selling Stockholder (i) in cash or by cashier's check,

(ii) by wire transfer of immediately available funds, or (iii) by any

combination of the foregoing.

 

                    (e) Upon the date that payment is made for the Offered Stock

purchased by the Company or the Investors, Series A Stockholders, or Other

Common Stockholders pursuant to their respective Rights of First Refusal

hereunder, the Selling Stockholder will have no further rights as a holder of

such Offered Stock and the Selling Stockholder will forthwith cause all

certificate(s) evidencing such Offered Stock to be surrendered to the Company

for cancellation, or, as to purchases by Investor(s), Series A Stockholder(s),

or Other Common Stockholder(s), for transfer to the purchasing Investor(s),

Series A Stockholder(s), or Other Common Stockholder(s).

 

                    (f) If the Company, the Investors, the Series A

Stockholders, or the Other Common Stockholders have not elected pursuant to

their respective Rights of First Refusal set forth in paragraphs (a) and (b) of

this Section 3 to purchase all of the Offered Stock, then the Selling

Stockholder shall have the right either to (i) elect to sell to the Company, the

Investors, the Series A Stockholders, or the Other Common Stockholders whatever

portion of the Offered Stock that Company, the Investors, the Series A

Stockholders, and the Other Common Stockholders have elected to purchase

pursuant to paragraphs (a) and (b) of this Section 3 and transfer the remaining

Offered Stock to any person named as a Proposed Transferee in the Selling

Stockholder's Notice, or (ii) withdraw all offers under this Section 3 and

either retain the Offered Stock or transfer the Offered Stock proposed to be

 

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sold by the Selling Stockholder to any person named as a Proposed Transferee in

the Selling Stockholder's Notice, in either case at the Offered Price or at a

higher price, provided that such transfer (i) is consummated within 120 days

after the date of the Selling Stockholder's Notice and (ii) is in accordance

with the terms and conditions of this Agreement (including the co-sale rights

provided for in Section 6). If the Offered Stock is transferred in accordance

with the terms and conditions of this Agreement, then the Proposed Transferee(s)

of the Offered Stock will thereafter hold such Offered Stock free of all

restrictions on transfer imposed by this Agreement. If the Offered Stock is not

so transferred during such 120-day period, then the Selling Stockholder will not

transfer any of such Offered Stock without complying again in full with the

provisions of this Agreement.

 

                     (g) The exercise or non-exercise of the rights of the

Investors, the Series A Stockholders, or the Other Common Stockholders hereunder

to participate in one or more Transfers of Offered Stock made by such Selling

Stockholder shall not adversely affect their rights to participate in subsequent

Transfers of Offered Stock subject to this Section 3. An Investor or Series A

Stockholder that exercises its right to purchase Offered Stock pursuant to

Section 4(b)(ii) shall not be entitled to exercise its co-sale right under

Section 6.

 

4. RIGHT OF FIRST REFUSAL WITH RESPECT TO PREFERRED STOCKHOLDERS.

 

                    (a) The Company shall have a right of first refusal (the

"Company's Preferred Right of First Refusal") to purchase all or any part of the

Stock of any Preferred Stockholder proposed to be transferred by such Preferred

Stockholder ("Offered Preferred Stock"), if the Company gives written notice of

the exercise of such right to the Selling Stockholder within 20 days (the

"Company's Preferred Refusal Period") after the date of the Selling

Stockholder's Notice to the Company. Prior to the expiration of the Company's

Preferred Refusal Period, the Company shall send written notice (the "Company's

Preferred Notice") to the Selling Stockholder and to each other Series A

Stockholder, Investor, and Common Stockholder specifying (i) that the Company

intends to exercise the Company's Preferred Right of First Refusal in full or in

part, (ii) that the Company does not intend to exercise the Company's Preferred

Right of First Refusal in full, or (iii) that the Company is not lawfully able

to repurchase all or any portion of the Offered Preferred Stock.

 

                    (b) If the Company does not exercise its right of first

refusal in full, each other Preferred Stockholder and each Common Stockholder

will have a right of first refusal (the "Stockholders' Right of First Refusal")

to purchase some or all of the Offered Preferred Stock not purchased by the

Company. The Stockholders' Right of First Refusal may be exercised as follows:

 

                    (i) Each Preferred Stockholder (other than the Selling

Stockholder) and each Common Stockholder desiring to purchase some or all of the

Offered Preferred Stock must, within the 20-day period commencing on the date of

the Company's Preferred Notice or expiration of the period therefor (the

"Stockholder Refusal Period"), give written notice to the Selling Stockholder

and to the Company of such Preferred Stockholder's or Common Stockholder's

election to purchase the Offered Preferred Stock, and the number of shares and

type of the Offered Preferred Stock that such Preferred Stockholder or Common

Stockholder desires to purchase. If the total number of shares specified in the

 

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elections of the Preferred Stockholders and Common Stockholders exceeds the

number of shares of Offered Preferred Stock available for purchase, then (unless

the electing Preferred Stockholders and Common Stockholders otherwise agree in

writing) each Preferred Stockholder and Common Stockholder electing to purchase

will have the right to purchase that number of shares of Offered Preferred Stock

that is obtained by multiplying the number of shares of Offered Preferred Stock

available for purchase by a fraction (A) the numerator of which will be the

number of shares of Common Stock then held by such Preferred Stockholder or

Common Stockholder, and (B) the denominator of which will be the sum of the

total number of shares of Common Stock then held by all Preferred Stockholders

and Common Stockholders electing to purchase the Offered Preferred Stock.

 

                    (ii) Within five days after expiration of the Stockholder

Refusal Period, the Company will give written notice (the "Preferred

Stockholders' Notice") to the Selling Stockholder, the other Preferred

Stockholders and the Common Stockholders specifying that some or all of the

Offered Preferred Stock was subscribed by the Company, the other Preferred

Stockholders and/or the Common Stockholders exercising their respective Rights

of First Refusal.

 

                    (c) The purchase price for the Offered Preferred Stock to be

purchased by the Company, by a Preferred Stockholder or by a Common Stockholder

exercising its Right of First Refusal under this Agreement will be the Offered

Price (subject, in the case of the Company, to any rights the Company may have

under any other agreement to purchase all or some of such Offered Preferred

Stock at a lower price), and will be payable as set forth in Section 4(d)

hereof. If the Offered Price includes consideration other than cash, the cash

equivalent value of the non-cash consideration will be determined by the Board

of Directors of the Company in good faith, which determination will be binding

upon the Company, the Preferred Stockholders, the Common Stockholders, and the

Selling Stockholder absent fraud or error.

 

                    (d) Payment of the purchase price for Offered Preferred

Stock purchased by the Company, a Preferred Stockholder, or a Common Stockholder

exercising its respective Right of First Refusal shall be made within 10 days

after the date of the Preferred Stockholders' Notice; provided that, if the

Company elects to purchase all of the Offered Preferred Stock, payment of the

purchase price for such Offered Preferred Stock shall be made within 10 days

after the earlier of (i) the date of the Company's Preferred Notice or (ii) the

expiration of the Company's Preferred Refusal Period. Payment of the purchase

price will be made, at the option of the Company or, as the case may be, by a

Preferred Stockholder or Common Stockholder to the Sell